How to invest in REOs and Foreclosures
REO homes, also known as bank foreclosures, are real estate properties that are owned by a bank. This usually happens after borrowers default on their home mortgage loans, causing banks (creditors) to take back the properties. Purchasing REO homes is a great way to get a bargain on a new home or rental property. Since what is owed to the bank is almost always more than what the property is worth (in our current market), very few foreclosure auctions result in a successful sale. Then the property "reverts" to the bank. It becomes an REO, or "real estate owned" property.
The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS for removal of tax liens and pay off any homeowner's association dues. As a purchaser of an REO property, the buyer will receive a title insurance policy and the opportunity to investigate the property. The next step is to make an offer.
Making an Offer
Before making an offer, have your agent contact the the listing agent and ask the following:
Offers are usually FAXED to the bank. The listing agent needs your originals. There is no formal presentation. Keep in mind that nothing happens in the evenings and weekends since the banks are closed.
Since there is no face-to-face presentation to the bank, provide the listing agent with a pre-qualification or better yet, a pre-approval letter and buyer biography makes the offer easier to accept.
At TL Summit our experienced agents can help you with this entire process and make your buying experience smooth and easy.